Green Packet’s target to be Ebitda positive may be delayed

Green Packet Bhd’s target to turn earnings before interest, tax, depreciation and amortisation (Ebitda) positive by year-end may be delayed to next year following South Korea’s SK Telecom buying a 25.8% stake in its subsidiary and WiMAX arm, Packet One Networks (Malaysia) Sdn Bhd (P1), for US$100 million (RM325 million).

“We were targeting for Ebitda to break even and turn positive by end of 2010, but after discussions with our new partner (SK Telecom), we are going to be more aggressive this year in expanding our network, advertising and gaining subscriber base,” said Green Packet group managing director C C Puan after the signing ceremony to seal the alliance between P1 and SK Telecom here yesterday.

P1 CEO Michael Lai said the new target was also dependent on the subscribers gained and the average revenue per user (ARPU) by next year.

P1 closed last year with nearly 140,000 subscribers and an ARPU of RM80. This year, it expects to double the subscriber base to about 280,000. As at end of March 2010, it had garnered 175,000 subscribers.

In its first quarter ended March 31, 2010 (3QFY10), Green Packet’s loss before interest, tax, depreciation and amortisation totalled RM29.8 million, while revenue was RM86.8 million, an increase of 53% on a quarter-on-quarter basis and 109% on a year-on-year basis. Meanwhile, following SK Telecom’s entry as a strategic investor in P1, the US$100 million will be used to expand its WiMAX rollout nationwide, enhance quality, accelerate and expand customer acquisition activities and other corporate purposes over the next two to three years.

Puan said the group had invested about RM550 million in capital expenditure in the WiMAX network since 2008 and would require another RM450 million to cover 65% of the population by 2012 from 40% currently. He added that the expenditure would be financed by internal funds, vendor funding and SK Telecom’s investment.

“We will go into East Malaysia by next year. Right now, we are also running WiMAX trials in Singapore. Over there, we have a bigger spectrum of 62Mhz compared with 30 Mhz here,” said Puan.

Furthermore, SK Telecom will offer P1 its customer products portfolio and expertise in technology and network. SK Telecom is one of the leading telcos in South Korea and operates a WiBro licence, a family of WiMAX.

Its entry into P1 comes from new shares issued, making it the second largest shareholder in P1 after Green Packet. Puan added that there would be no changes in the management team at P1, and SK Telecom would play an advisory role while sitting on the board.

“We are about to embark on a collaboration with P1 that includes more than the US$100 million investment. After discussions during the next couple of months, exact details will be released,” said Ki Haeng Cho, an SK Telecom’s division president.

Later, in a separate event, P1, with Intel Malaysia, hosted the launch of Malaysia’s first WiMAX-ready 4G laptops running on embedded chips from Intel. Intel Capital, an investment arm of Intel Corp, in 2008 had injected RM50 million into Green Packet to boost WiMAX deployment.

Lai believes the introduction of the WiMAX-ready 4G laptops will increase P1’s subscriber base. P1 plans to offer free WiMAX subscription within the first few months when users buy these laptops. Acer, Asus, Dell, Lenovo, MSI and Toshiba have introduced both notebooks and netbooks based on the Intel processors featuring the dual mode Intel Centrino Advanced-N + WiMAX 6250 embedded solution, which has been certified and ready for use on the P1 WiMAX network.

“We are coupling mobile computing and mobile networking. Just like the embedded Wi-Fi you see in laptops, this is going to make the whole city into a hot spot,” said Lai.


This article appeared in The Edge Financial Daily, June 30, 2010.